If the One-Year Discount Factor Is Equal to 0

question 8

Multiple Choice

If the one-year discount factor is equal to 0.90909, the interest must be equal to

• A)9.5%.
• B)5.0%.
• C)10.0%.
• D)9.1%.

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Definitions:

Independent Events

Two events are considered independent when the happening of one does not influence the likelihood of the happening of the other.

Probability

An indicator showing the probability that a specific event will take place, represented by a numerical value ranging from 0 to 1.

Experiment

An organized experiment designed to uncover new knowledge, validate a conjecture, or confirm an existing reality.

Unbiased Coins

A theoretical or actual coin for which the probability of landing heads or tails is equal, exemplifying a fair probability scenario in random experiments.